• Strong yen eroding Japan’s competitiveness -Nippon Keidanren head
  • Japan senior govt official: No change in Japan’s stance of watching forex moves closely, to act appropriately. Japan’s solo intervention moves since last Summer necessary
  • French auction results
  • Saudi Arabia is ready to fill any oil supply gap if needed – Saudi source
  • German November prelim retail sales -0.9%, markedly weaker than Reuter’s median forecast of flat
  • French December consumer confidence index stable at 80 after November revised upwards to 80 from previous 79
  • Italy November adj jobless rises to 8.6% from 8.5% in October, highest since May 2010
  • UK December services PMI 54.1, up from 52.1 in November and much stronger than median forecast of 51.5
  • Eurozone Oct industrial orders +1.8% m/m, +1.6% y/y, weaker than median forecasts of +2.4%, +3.3% respectively
  • Euro zone Nov producer prices +0.2% m/m, +5.3% y/y, pretty much in line with median forecasts +0.1%, +5.2% respectively
  • Japan govt official: To keep buying EFSF bonds while watching Europe efforts
  • Talk ECB been buying Italian bonds
  • BOE: UK banks warn that euro crisis funding costs may hit credit availability
  • French PM Fillon: “Determined” to see a transaction tax in 2012
  • Earthquake 5.5 magnitude hits Dominican Republic

European stocks lower, gold lower, US treasury yields lower, EVEN oil bit lower. We don’t want no stinkin risk.

European banking jitters very much to the fore, even had a rumour this morning that the mighty Deutsche is in need of capital.

EUR/USD down at 1.2835 from early 1.2910 having been as low 1.2820. We rallied early, BIS notable buyer under 1.2920. We couldn’t take out the 1.2947 overnight high, amid talk of sell orders lined up at 1.2950 and stronger at 1.2960/80.

European stocks turned south and EUR/USD followed in tandem. Hedge funds said to sellers again (when aren’t they selling) We stood back down around 1.2910 when we started to get wind of the Deutsche rumour.

Reports had decent buy orders 1.2900/05, but they gave way tamely and sell stops below 1.2900 and 1.2890 were tripped in quick succession accelerating the sell-off. As the stops were being taken out, reports had a large French bank a very notable seller. The close proximity of the French auctions didn’t help things any. What did the Frenchies know that we didn’t?

As it turned out the auctions were OK, but that fact didn’t arrest the single currency’s slide.

USD/JPY touch firmer at 76.82 from early 76.72. Still getting the reports of Kampo interest lying in wait just south of present levels ie starting at 76.60

EUR/JPY down at 98.60 from early 99.10, having been as low as 98.51. Talk of 98.50 barrier option interest. Japanese and real money buying noted around the lows, lending tenuous support.